Millennials: Avocados or homes?

[taco.vidal]

Originally Posted by OMG!WTF!

If you want to beat the market, study that. It quite often comes down to risk management. But there are people, lots of people, who can and do beat the market year after year. It's no fluke, luck or gamble.

Lol. Lots of people beat the market? So much wrong with this post, not just that sentence.

[OMG!WTF!]

Originally Posted by taco.vidal

Lol. Lots of people beat the market? So much wrong with this post, not just that sentence.

Yes. Lots of people. Obviously not the majority. But there are plenty who do. Trading isn't what you think it is.

[Hockeyboy2]

I have not done that badly in my life. I think it comes down to a few basics.

1. Don't live beyond your means.
2. Invest young and invest in progressive Funds and stocks that return a dividend
3. Be educated in a way that you can contribute to society
4. Marry a woman who can double as your lover and best friend
5. Don't fall for trends and be true to your gameplan
6. Be your own self and do not compromise to appease to others

That is how I have built my wealth and people who know me would tell you I am NOT the smartest man in the room, but I am the most genuine and interesting.

[afc wimbledon]

Originally Posted by Enoch Root

1985 wasn't even close to the worst. In 1981, mortgage rates broke through 20%. Thousands of people simply walked away from their homes because they couldn't afford the renewal.

Let that sink in.

Yes it weird but a cheap house in the eighties was harder to pay for, easier to get in on mind you as the down payments were smaller so you could save them up, but once you bought the sod you were immediately utterly broke and worried, not only could you not be sure of making the payments but you also couldn't sell the bastard either.

Today you know no matter how bad a decision you make you can at least sell the house, back then you had to declare bankruptcy

[Sliver]

Originally Posted by Hockeyboy2

I have not done that badly in my life. I think it comes down to a few basics.

1. Don't live beyond your means.
2. Invest young and invest in progressive Funds and stocks that return a dividend
3. Be educated in a way that you can contribute to society
4. Marry a woman who can double as your lover and best friend
5. Don't fall for trends and be true to your gameplan
6. Be your own self and do not compromise to appease to others

That is how I have built my wealth and people who know me would tell you I am NOT the smartest man in the room, but I am the most genuine and interesting.

And the most humble.

[Hockeyboy2]

Originally Posted by afc wimbledon

Yes it weird but a cheap house in the eighties was harder to pay for, easier to get in on mind you as the down payments were smaller so you could save them up, but once you bought the sod you were immediately utterly broke and worried, not only could you not be sure of making the payments but you also couldn't sell the bastard either.

Today you know no matter how bad a decision you make you can at least sell the house, back then you had to declare bankruptcy

Interest rate differential, I was but a young boy in the 80's but the interest rates were 19% or so, compared to the 2 to 3 percent in todays world, that is what is dramatically different. Yes I am captain obvious.

House prices were much lower though, my folks bought a $90,000 dollar house and it is worth well over $600,000 today. That sounds nuts just writing it, but they have invested in it very well.

[Enoch Root]

Originally Posted by peter12

What do you mean? GDP growth? The Canadian economy will be lucky to grow by 1% this year.

No, equity growth. Companies grow at a higher rate than the overall economy does.

[afc wimbledon]

Originally Posted by Hockeyboy2

Interest rate differential, I was but a young boy in the 80's but the interest rates were 19% or so, compared to the 2 to 3 percent in todays world, that is what is dramatically different. Yes I am captain obvious.

House prices were much lower though, my folks bought a $90,000 dollar house and it is worth well over $600,000 today. That sounds nuts just writing it, but they have invested in it very well.

It was more frightening then as I recall, I have young friends buying their first apartment here and its, in their minds, utterly risk free, where as back then you were stuck with it no matter what, lose your job, bankrupt, get sick bankrupt, sales a bit slow, bankrupt.

the house seemed like a curse when you had those nights worrying about your income, renting seemed like the best idea

[Clarkey]

Originally Posted by Hockeyboy2

but I am the most genuine and interesting.

Please extrapolate on the most interesting part. Are you sure you are interesting to others or just self deluded and suffering from an id-complex. What have you done or what do you do to make such a bold proclamation?

[Enoch Root]

Originally Posted by peter12

You run a financial company?

http://www.moneysense.ca/save/invest...rns-are-a-lie/

http://www.theglobeandmail.com/globe...article536314/

Yes.

Are you pointing out geometric growth to me? Yes I know, thanks. And I only refer to geometric rates of return, not averages.

[Hockeyboy2]

Originally Posted by Clarkey

Please extrapolate on the most interesting part. Are you sure you are interesting to others or just self deluded and suffering from an id-complex. What have you done or what do you do to make such a bold proclamation?

I can absolutely converse with you over private email regarding specifics, but I doubt you really care to know me.

Factors that contribute to being interesting
1. Having a very interesting story to tell
2. Overcoming huge obstacles in your life
3. Being engaging and original
4. Achieving success when you re not supposed to
5. Being in the public eye during a period of your life

[GGG]

Originally Posted by taco.vidal

Lol. Lots of people beat the market? So much wrong with this post, not just that sentence.

Actually anyone with an above average risk tolerance will in the long term beat "the market" assuming that all investors are equally skilled.

To reduce risk you have to invest in a non-optimum way and since the market is effectively a zero sum game with an underlying upward direction of some people do not get the underlying market return it means that some people have to be consistently getting above average returns consistently.

This isn't to say that an investor can consistently do better than the rate of return their risk profile should generate. There is no evidence that they can. Just that the market is built out of various levels of risk takers and if you believe people can reduce or even eliminate the risk of their investment while making a below market average return the person absorbing the risk on average will make above average returns.

[Enoch Root]

Okay, I am getting a little concerned here...

Originally Posted by peter12

But 6.4% was the right answer, and 7% wasn't.

To be clear, I am not complaining. I invest a lot of my savings, and I do okay, but there is some absolute nonsensical bragging going on this thread with basically circumstantial and anecdotal evidence being offered.

You understand that the article you referenced was stating its views on expected returns right? That's not what the market actually returned.

Originally Posted by peter12

Then, you're lying. Average RoR for Canadian equity in 2016 was 6.4%. How did you beat the market?

Nope. Maybe not.

Originally Posted by peter12

If you are regularly beating bench-marks, then you are either a criminal or incredibly lucky.

For goodness sake, I have a CFA 1 and I work in marketing, and I know this stuff. I barely passed Grade 12 math, and I get that the law of averages applies for a reason.

You need to learn the difference between expected return and actual returns if you are planning on becoming a CFA.

As for your claims that people are lying, most people are listing their returns on index funds which, by definition, aren't beating the market. The simple fact of the matter is that market returns have been higher than 7%. And they usually are (over reasonable time periods).

And yes, I am talking about geometric returns.

[Ozy_Flame]

Originally Posted by Hockeyboy2

I can absolutely converse with you over private email regarding specifics, but I doubt you really care to know me.

Factors that contribute to being interesting
1. Having a very interesting story to tell
2. Overcoming huge obstacles in your life
3. Being engaging and original
4. Achieving success when you re not supposed to
5. Being in the public eye during a period of your life

People who are interesting don't usually have to proclaim themselves interesting.

[Hockeyboy2]

Originally Posted by Ozy_Flame

People who are interesting don't usually have to proclaim themselves interesting.

This is very true, although the guy did ask so I gave him some guidelines based on my own life experiences.

Kind of a counterproductive statement on my behalf I suppose...oh well.

You have yourself a great day.

[Wood]

Was hockeyboy1 taken?

[Hockeyboy2]

Originally Posted by Wood

Was hockeyboy1 taken?

In 2005 when I signed up here. I don't recall, but it stands to reason both Hockeyboy and Hockeyboy1 would have been taken.

[nik-]

Just had to get it though? Didn't want to maybe switch it up?

[opendoor]

Originally Posted by Enoch Root

interest rates: 9%, 7% and 2.5% respectively

You tell me which situation would be easiest for a young person entering the market. Here are the three examples with a 20% down payment and a 25 year mortgage at those rates with all the dollars inflation adjusted:

1969: $53K down and $1749 a month

1998: $53K down and $1479 a month

2017: $150K down and $2688 a month

So a person now has to save up 3 times as much of a down payment and their mortgage payments are 50-80% higher than in the previous examples. You could get a 10 year mortgage on that 1998 house and still be paying more than $200 less per month than the 2017 one. Hell, you could literally have a 0% interest rate on the $750K house and the payments would still be 35% higher than the 1998 one.

And of course the older examples are vastly easier to pay off early. If you can manage $200 a month extra towards your principal you'd pay off your mortgage 6.8 and 6.3 years early in the first 2 examples respectively. In the 3rd example you'd need to throw nearly 4 times that much money every month just to knock that amount of time off of it.

[Enoch Root]

Originally Posted by opendoor

You tell me which situation would be easiest for a young person entering the market. Here are the three examples with a 20% down payment and a 25 year mortgage at those rates with all the dollars inflation adjusted:

1969: $53K down and $1749 a month

1998: $53K down and $1479 a month

2017: $150K down and $2688 a month

So a person now has to save up 3 times as much of a down payment and their mortgage payments are 50-80% higher than in the previous examples. You could get a 10 year mortgage on that 1998 house and still be paying more than $200 less per month than the 2017 one. Hell, you could literally have a 0% interest rate on the $750K house and the payments would still be 35% higher than the 1998 one.

And of course the older examples are vastly easier to pay off early. If you can manage $200 a month extra towards your principal you'd pay off your mortgage 6.8 and 6.3 years early in the first 2 examples respectively. In the 3rd example you'd need to throw nearly 4 times that much money every month just to knock that amount of time off of it.

One final problem to address: where, other than in Vancouver or Toronto, is $750,000 representative of a starter home?

Comparable homes, in normal areas, when factored for interest rates, are not 3 to 4 times more expensive, as you were originally presenting them to be.

At least not when compared to the late 70s or early 80s. The 90s? Sure. Because housing prices had been flat for a while and weren't all that expensive compared to other periods.

Again, I am not saying things aren't tough right now. But the dates used in the original post to this chain were random and didn't represent anything close to the worst times to buy.

As your numbers show, once mtge rates are factored in, the differences are quite a bit less than the headline price implies. Looking at the early 80s, and comparing starter home to starter home, it isn't as crazy as some people want to believe.